Chart of the Day: Net New Jobs in May

The American economy added 38,000 new jobs last month. However, since we need 90,000 new jobs just to keep up with population growth, this means that net job growth clocked in at a dismal -52,000 jobs. The official excuse for this drop was the big Verizon strike, but that seems unlikely to account for more than a fraction of the bad news.

The headline unemployment rate declined to 4.7 percent, but obviously this isn't because more people found work. It's because a whopping half million people—most of them unemployed—simply dropped out of the labor force. The bleak arithmetic is on the right. However, it's not clear why so many people exited the labor force. Some are new retirees, of course. More pointedly, some of them appear to be long-term unemployed who got discouraged and gave up looking for work, but that accounts for only part of the drop.

Unsurprisingly, labor force participation was down by 0.2 percentage points. Hourly earnings of production and nonsupervisory employees were up at an annual rate of about 1.7 percent compared to last month, which means wages were about flat in real terms. Overall, this was a really discouraging report. If you insist on a silver lining, here it is: It's probably less likely now that the Fed will raise interest rates at their next meeting.

Donald Trump's core support is, famously, concentrated among whites with high school degrees or less. Via Ronald Brownstein, here's how these folks feel about cultural change:

No surprise here. They're a little bit sexist, a little bit homophobic, a little bit racist, and a little bit xenophobic. In other words, perfect for Trump.

Why bring this up? I realize I'm beating a dead horse here, but this particular horse needs to be put well and truly out of its misery. These folks aren't voting for Trump because of economic angst. That may play a minor role, but it's not what really bugs them. The economy has been picking up for years and all of the evidence suggests that most Trump supporters are doing at least OK financially. What bugs them is culture war stuff.

This is nothing new. These are the same folks who deserted George McGovern over acid, amnesty, and abortion. They're the Reagan Democrats. They're the Rush Limbaugh shock troops. They're the core audience for Fox News. They're the tea party. They've been deserting the Democratic Party over "family values" for more than 40 years.

This is important not because liberals should spend more time berating these folks as racist and sexist and homophobic. We should probably do less of that. It's important because everyone needs to understand what it would take to peel off Trump's supporters. It's not going to happen by campaigning on Wall Street regulation or trade deals or the minimum wage. It can only happen by soft-pedaling liberal support for civil rights, gay rights, immigration reform, and so forth. Does anyone want to do that?

I didn't think so.

Once and for all, let's put the whole "economic angst" argument into the ashcan of history. It's out there. It's an issue. But it's not a big one. The folks who support Trump are doing it because they think white male culture is under siege. That's why Trump doesn't spend much time talking about his tax plan but does spend day after day ranting about judge Gonzalo Curiel being unfair to Trump because he's "of Mexican heritage" and a member of a Latino lawyers' association. His followers eat that stuff up, and we're going to be hearing a lot more of it over the next few months.

Which is better, in-band signaling or out-of-band signaling? Old-school telecom geeks know what I'm talking about. In-band means that control codes (start, stop, ready, etc.) are transmitted as part of the data stream. Out-of-band means that control signals are transmitted on a dedicated channel separate from the data stream.

Why bring this up? Because it's gained new salience in the era of Trump falsehoods: They now come so thick and fast that new standards have to be developed to deal with them. CNN, for example, apparently endorses out-of-band fact checking. They simply let Trump speak and paste the fact checking into the chyron. The New York Times, by contrast, prefers in-band fact checking. They let readers know about Trump's lies directly in the text of their stories.

Which is the better standard? Do we even need a standard for correcting Trump's lies? Will Trump be able to overwhelm us regardless of which standard we choose? These are critical questions for the upcoming campaign season. Who will take the lead on this?

Here's the Best News We've Gotten All Year

No joke. This may be boring as hell, but it really and truly is great news:

Federal Reserve officials strongly signaled they will toughen big-bank capital requirements even more than they have since the 2008 crisis, a move that will add to the pressure on the largest U.S. banks to consider shrinking. Fed governors Daniel Tarullo and Jerome Powell, in separate public comments on Thursday, said the Fed would require eight of the largest U.S. banks to maintain more equity to pass the central bank’s annual “stress tests.”

“Effectively, this will be a significant increase in capital,” Mr. Tarullo said on Bloomberg television....Mr. Powell said at a banking conference that the Fed’s move would make big banks “fully internalize the risk” they pose to the economy.

“I have not reached any conclusion that a particular bank needs to be broken up or anything like that,” he said. The point is to “raise capital requirements to the point at which it becomes a question that banks have to ask themselves.”

Bernie Sanders has campaigned heavily on the idea of breaking up big banks. But that shouldn't be our goal. Our goal should be to make banks safer and to reduce the likelihood that they need to be bailed out in the future. That's what higher capital requirements do: they force banks to carry a bigger buffer against losses, which makes them less likely to fail in any future downturn.

As it happens, new regulations put in place since the financial meltdown of 2008 have already increased capital requirements, but big banks still have an unfair advantage in the market: their funding costs are lower because investors figure they'll be bailed out if they ever implode in the future. To make up for this, big banks should, as Tarullo said, "fully internalize the risk" they pose to the economy. In other words, if big banks have an automatic advantage simply because taxpayers have little choice but to rescue them in case they fail, they should be required to pay higher insurance premiums against failure. That's essentially what higher capital requirements do.

This is fair. However, higher capital requirements also make big banks less profitable, which in turn gives them a strong incentive to downsize all on their own. And that's how it should be. There's no reason for the Fed or anyone else to pick and choose banks to break up. We just need to make sure they're reasonably safe and are operating on a level playing field. If we do this, we're providing an organic incentive to downsize. The banks themselves get to decide whether and how to do it.

The only bad news here is that the Fed is unlikely to raise capital requirements enough to suit me. Nonetheless, this is very much another step in the right direction.

Dave Weigel says that conservatives weren't impressed with President Obama's speech yesterday:

I was actually sort of surprised by the lack of conservative reaction to Obama's speech. I guess they must be keeping their outrage to themselves—which is a bit odd, since Obama's speech was about the most partisan attack on Republicans I've ever heard him give outside a campaign. Here's a taste:

I'm going to start with the story that...most Republican candidates up and down the ticket are telling....America’s working class, America's middle class — families like yours — have been victimized by a big, bloated federal government run by a bunch of left-wing elitists like me. And the government is taking your hard-earned tax dollars and it's giving them to freeloaders and welfare cheats. And we're strangling business with endless regulations. And this federal government is letting immigrants and foreigners steal whatever jobs Obamacare hasn’t killed yet. (Laughter.)

....I haven’t turned on Fox News or listened to conservative talk radio yet today, but I’ve turned them on enough over these past seven and a half years to know I’m not exaggerating in terms of their story....But it’s not supported by the facts. But they say it anyway. Now, why is that? It’s because it has worked to get them votes, at least at the congressional level.

Because — and here, look, I’m just being blunt with you — by telling hardworking, middle-class families that the reason they’re getting squeezed is because of some moochers at the bottom of the income ladder, because of minorities, or because of immigrants, or because of public employees, or because of feminists — (laughter) — because of poor folks who aren’t willing to work, they’ve been able to promote policies that protect powerful special interests and those who are at the very top of the economic pyramid. That’s just the truth. (Applause.)

I hope you don’t mind me being blunt about this, but I’ve been listening to this stuff for a while now. (Laughter.) And I’m concerned when I watch the direction of our politics. I mean, we have been hearing this story for decades. Tales about welfare queens, talking about takers, talking about the “47 percent.” It’s the story that is broadcast every day on some cable news stations, on right-wing radio, it’s pumped into cars, and bars, and VFW halls all across America, and right here in Elkhart.

There's more, and it's mostly a sustained attack on conservative misinformation about the economy and Obama's policies. It's also a sustained attack on Donald Trump, even though Trump's name is never mentioned. After seven years of holding his tongue, it's pretty obvious that Obama is eager for the Democratic primary to finish up so he can get out on the campaign trail and tell us what he really thinks of the Republican Party these days.

And if you're interested in policy, here's what Obama had to offer:

  • Raise the minimum wage
  • Increase unionization
  • More early childhood education
  • Free community college
  • Build more infrastructure
  • Expand Social Security
  • Pass TPP
  • Strengthen Wall Street regulations

That all sounds very Hillary-esque, doesn't it?

As you know, several former students at Trump University have claimed that the whole operation was a fraud. Trump's response has been simple: these are just a few malcontents. Most of Trump U's students were delighted with the education they got.

Well, funny thing about that. The recently unsealed documents in the class-action suit against Trump U included the names of a bunch of those delighted students. So Brandy Zadrozny of the Daily Beast decided to give them a call. She managed to contact five of them:

“Trump University is some [of] the best money I ever invested,” wrote Ryan Maddings in one of the evaluations for a 3-day Trump University retreat....“It was a lie,” said Maddings, an ex-marine now 32, who told The Daily Beast that he racked up around $45,000 in credit card debt to buy Trump University seminars and products.

....Julie Lord, 51, of New Port Richey, Florida...said she dropped around $80,000 on Trump University seminars, mentorships, and products, but felt like more of “a target” than a student.

...Despite her current claim that she “got burned by Trump U,” in her written evaluation, Lord rated every aspect of the 2008 seminar as “excellent,” adding several plus signs to the maximum 5 rating. “I am so sorry that I did that,” Lord told The Daily Beast after hearing that her positive review is being used as evidence by Trump’s defense. “But they actually coached you.”

The most positive responses Zadrozny managed to get were from one guy who said Trump U was "fine"—though he says he could have learned the same stuff online for free—and another who said she was happy but had never managed to put her Trump U education to any use. What these two have in common is that they managed to avoid the hard sell and ended up spending only a few thousand dollars on Trump U seminars. The folks who got pressured into signing up for the full con, however, seem to pretty routinely feel they were burned. If these are the folks that Trump plans to trot out as defenders of his scam university, he better think twice.

The Department of Labor announced today that the 4-week moving average of initial unemployment claims was 276,000 in May. "This marks 65 consecutive weeks of initial claims below 300,000, the longest streak since 1973."

Not bad—especially when you consider that the population of the country has increased by 50 percent since then. In fact, we missed a milestone earlier this year: adjusted for population, the number of initial unemployment claims since the beginning of 2016 has been the lowest in half a century. The economy still isn't quite firing on all cylinders, but this is yet another sign that it's doing pretty well.

On Wednesday President Obama joined the retirement crisis bandwagon:

A lot of Americans don’t have retirement savings. Even if they’ve got an account set up, they just don’t have enough money at the end of the month to save as much as they’d like because they’re just barely paying the bills. Fewer and fewer people have pensions they can really count on, which is why Social Security is more important than ever.

We can’t afford to weaken Social Security. We should be strengthening Social Security. And not only do we need to strengthen its long-term health, it’s time we finally made Social Security more generous, and increased its benefits so that today’s retirees and future generations get the dignified retirement that they’ve earned.

I concur in part and dissent in part. First the dissent: it's not true that "fewer and fewer" people have pensions they can count on. There has been a change in the number of old-style pensions ("defined-benefit plans") vs. 401(k)-style pensions ("defined-contribution plans"), but the overall share of workers covered has stayed pretty steady:

The total share of workers in pension plans of one kind or another was 45 percent in 1979 and 45 percent in 2011. There's been virtually no change over the past 30 years.

But wait! Those old-style pensions were more generous. Surely that's what Obama meant by pensions that people "can really count on"? Not so much, it turns out. The Center for Retirement Research at Boston College has been warning about the retirement crisis for some time, but recently they re-analyzed pension data based on new NIPA data that allows a more accurate look at pension accruals. Here's their updated chart:

The total pension wealth of the American public has barely budged even as the source of pension wealth has changed dramatically. It was about 13 percent of total wages in 1984 and 14 percent in 2012. CRR's conclusion from this new data is that "the accumulation of retirement assets has not declined as a result of the shift from defined benefit to defined contribution plans." As they cheerfully admit, "We are going to have to change our story!"

Now it's true, in theory, that old-style pensions were safer than 401(k) plans, which bob up and down with the stock market. But this difference is often overstated. For one thing, 401(k) plans generally show fairly steady growth over any time frame more than three or four years. Even the Great Recession only weakened them from 2009-12, and they've recovered very nicely since then. For another, all those old pension funds were invested in stocks and bonds as well, and if the market goes south, they go south as well. The most recent example of this is the Teamsters’ Central States Pension Fund.

That said, I concur in part with President Obama. Probably the biggest problem with 401(k)-style plans is that they tend to benefit high earners more than old-style pensions did. The difference isn't enormous—though we can't say for sure since distributional detail isn't available for past decades—but it's probably true that 401(k)s are somewhat less generous to low earners than older defined-benefit plans were. This is not a fatal defect, however, and it's one that's being addressed fairly successfully already. Another problem with 401(k) plans is high fees, and that's also a problem that's being addressed—though for my money it could stand to be addressed with considerably more vigor.

Here's what all this adds up to: the best way to address retirement security is to continue reforming 401(k) plans and to expand Social Security—but only for low-income workers. Middle-class workers are generally doing reasonably well, and certainly as well as they did in the past. We don't need a massive and expensive expansion of Social Security for everyone, but we do need to make Social Security more generous for the bottom quarter or so of the population that's doing poorly in both relative and absolute terms. This is something that every liberal ought to support, and hopefully this is the bandwagon that President Obama in now on.

The Wall Street Journal passes along good news today:

Fed’s Beige Book: ‘Tight Labor Markets’ Are Pushing Up Wages

Tight labor markets are good. But how tight are they, really? The full Fed report is here. Here's the super-abridged version of the twelve regional reports:

  • Boston: Labor demand was robust.
  • New York: The labor market has continued to tighten.
  • St. Louis: Wage growth was strong.
  • Philadelphia: Wage pressure was modest.
  • Richmond: Labor demand rose moderately.
  • Atlanta: Wage pressure was modest.
  • Chicago: Wage pressure picked up some.
  • Minneapolis: Wage pressure was moderate.
  • San Francisco: Wage inflation picked up somewhat.
  • Kansas City: Wages grew slightly.
  • Dallas: Wage pressures were minimal.
  • Cleveland: Payrolls were little changed on balance.

I score it like this: Three districts reported strong labor demand; six reported modest tightening; and three reported minimal change. There's some good news here and there, and overall growth seems to be decent, but that's about it. There's certainly not the slightest suggestion that labor markets are truly tight, or in any danger of overheating. Nor is inflation is danger of overheating: it's still piddling along at well under the target range of 2 percent. As former Fed governor Narayana Kocherlakota says, there's simply nothing either here or in the official inflation figures to suggest that the Fed should do anything to put the brakes on the economy right now.

Go Ahead. Have a Potato Chip.

The FDA wants the food industry to cut down on sodium. Julia Belluz reports:

Public health groups have been sounding the alarm for years about how the food industry's liberal use of sodium is harmful to our health....As it stands, the average American consumes about 3,400 mg of sodium per day. Health officials recommend that people aim to eat no more than 2,300 mg per day.

....The new guidelines, which are still in draft form, set targets for the gradual lowering of salt in a range of products including both processed and restaurant foods over the short term (two years) and long term (10 years).

I don't have anything against cutting back on salt. It's always struck me as sort of a vicious circle: we put more salt in our food; we get accustomed to the higher sodium level; so we put even more salt in our food. What's the point?

But that's just a personal opinion. When it comes to the actual health risks of salt, that 2300 mg recommendation is almost certainly bogus. Here's master debunker Aaron Carroll on a recent study of sodium intake in the New England Journal of Medicine:

Americans consume, on average, 3.4 grams of sodium per day....This is on the low end of the “safe zone” of 3-6 grams in the study. The United States Food and Drug Administration thinks that’s not low enough. It recommends 2.3 grams per day.

Why? There’s surprisingly little rationale for this belief. Last year, experts convened by the Institute of Medicine assessed the evidence concerning sodium intake around the world. They agreed that efforts to reduce excessive sodium were warranted. But they cautioned that no such evidence existed to recommend a very low salt diet....What [the NEJM study] found was worrisome. When compared with those who consumed 3-6 grams per day, people who consumed less than 3 grams of sodium per day had an even higher risk of death or cardiovascular incidents than those who consumed more than 7 grams per day.

This result would be shocking if we in the medical community hadn’t seen it before. But we have. In 2011, researchers published a study in the Journal of the American Medical Association after following 3,681 people over almost a decade. They, too, found that excessive salt intake was associated with high blood pressure. They also found that a low-sodium diet was associated with higher mortality from cardiovascular causes.

The inevitable chart is below. The lesson here is simple: As with everything else, you shouldn't overdo the salt. And if you have a specific medical condition that requires low sodium, then listen to your doctor. Beyond that, though, the chances are that your sodium intake is fine. As near as I can tell, our nutritional establishment remains hellbent on hectoring us about our diets based on a combination of weak evidence and folk wisdom from Satchel Paige. Then they wonder why no one pays attention to them. It's a puzzler, all right.